IWMC 2020: Wealth Management Best Practices and Framework for Wealth Transfers by Mr. Rajesh Gupta

Speaker – Rajesh Gupta, Managing Partner at SNG and Partners

Moderator – Rajendra Kalur, CFA, Director – CFA Society India

Contributed by – Gaurav Somani, CFA, Member, Professional Learning Committee – CFA Society India


The theme of the session was to highlight the need and opportunity for Wealth Management Practitioners in Succession planning of Business and Estate for Family Owned Business. This is important because family owned Business empires contribute 65% of Indian GDP at the same time comprise the 35% of fortune 500 companies world over.

Preservation of Wealth with value creation for all stake holders along with business scalability, has been the big fuss for family managed business over years. #passingofbatton to the new generation along with keeping the interest and claims of all the stake holders has been matter of concern. Considering the large number of different type of stake holders (passive as well as active, participating and non participating), who will be having their own cognitive and emotional biases, ensuring an effective transfer is a challenging task. To provide effective solution for this complex problem, professional expertise is required in wealth management, regulatory and taxation aspects.

In general family managed business start with One person (Flag Bearer) and after initial success other family members join in. With scalability, need for professionals keeps on increasing, and that’s where thought to separate management from ownership has to be integrated. New generation moving abroad for studies to bring in new and updated ways of doing business and old generation wanting to keep primary Ethos intact, succession planning by aligning every one’s views become a challenging task. ‘Adapting to change’ becomes the key to scalability of family business.

Formation of “family constitution” helps in effective and conflict free succession planning. Family constitution is a document as to how family will be run, it clearly enumerates family ethos, vision, policy statement, manner and conduct expected of members, roles and responsibilities, duties and rights of all active and silent stake holders of the family. It talks not only about business participation, roles and responsibilities but also about family expenses to be incurred on education, marriage, leisure travel, cars, renovation, buying & selling of real estate, jewellery etc. From rights in family business and estate in case of marriage, divorce, expulsion due to misconduct, to transfer of ownership and rights to other members. It also states clear demarcation between personal and family assets. In short family constitution is Bible for family business. Equally important is establishment of family council responsible for governance and implementation as well as upgradations of family constitution.

Once family council and constitution is established succession planning process will start with:

Finalisation of structures: Trust / Will / Clauses in Memorandum and Articles of association / LLP / Partnership / Holding Company / SPV etc. Its important that structure support minimum tax/ minimum transfer duties/ estate duty etc every thing in sync with family constitution.

Compliance Check: Structure should be in compliance with corporate laws / SEBI / FEMA / Listing Requirements etc.

Documentation: Legal drafting is final knot that will hold everything done till this point meaningful. Draft should be simple, short, specific not leaving any room for any ambiguity and chances of future conflicts.

With all above things done professionally and properly, succession planning process will achieve its objective of sustainable growth and preservation of wealth with peace, harmony, continuity and without any conflicts.


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